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IMF Executive Board Concludes 2016 Article IV Consultation with Togo

May 17, 2017

On May 5, 2017, the Executive Board of the
International Monetary Fund (IMF) concluded the Article IV consultation
with Togo.
[1]
The Board also approved a new three-year Extended Credit Facility
Arrangement for Togo; a press release on this was issued separately.

The economy has expanded at a healthy rate in recent years. Growth was 5.2
percent in 2014-16 buoyed by infrastructure investments and strong
agricultural production. Inflation was well contained, explained by the
lower food, energy, and transport prices. Togo’s poverty rate declined from
61.7 percent in 2006 to 55.1 percent in 2015, though it remains
geographically concentrated.

The fast pace of public investment has contributed to a pronounced increase
in public debt and the current account deficit. Public debt, including
prefinancing debt, domestic arrears, and public enterprise debt, increased
from 48.6 percent of GDP in 2011 to 80.8 percent in 2016, reflecting public
infrastructure investments financed by both domestic and external
borrowing. The current account deficit remained high, reaching 9.8 percent
of GDP in 2016, largely due to investment-related imports.

Economic growth is expected to increase gradually in the medium term as the
fiscal stance is put on a sustainable path. Growth is expected to pick up
from 5 percent in 2016 to 5.6 by 2021, with the economy reaping the
benefits of an improved transportation network and productivity gains in
the agricultural sector. The private sector is expected to play an
increasing role as the engine of growth, as public investment returns to
its long-term sustainable level. Downside risks to growth include capacity
constraints in implementation of structural reforms, resistance to reforms
from interest groups, and further slowdown in Togo’s main regional trading
partners. With the improvement in the fiscal stance, public debt is
expected to be reduced from a projected peak of 81.3 percent of GDP in 2017
to 73 percent by 2019.

“Togo’s economy has shown solid performance in recent years, with sustained
growth and low inflation. The country’s growth performance has been
underpinned by high levels of public investment to address significant
infrastructure gaps. However, this capital spending has also increased
public debt and debt service pressures, crowding out needed social
expenditures. At the same time, lingering deficiencies in the financial
sector have remained unresolved.

“The new arrangement under the ECF will support the authorities’ efforts
towards fiscal consolidation while maintaining space for pro-poor spending.
Public financial and debt management will be strengthened and revenue
administration bolstered. The two under-capitalized public banks will be
consolidated into one healthy institution. Regulation and supervision
standards in the microfinance sector will be strengthened.

“The medium-term economic outlook is favorable, with private sector
activity benefiting from stronger infrastructure and an improved business
climate. However, further progress will hinge on the authorities’
successful implementation of their ambitious macroeconomic program, as well
as pursuing broader structural reforms to improve public financial
management and address social needs.”

[1]
Under Article IV of the IMF's Articles of Agreement, the IMF holds
bilateral discussions with members, usually every year. A staff
team visits the country, collects economic and financial
information, and discusses with officials the country's economic
developments and policies. On return to headquarters, the staff
prepares a report, which forms the basis for discussion by the
Executive Board.

[2]
At the conclusion of the discussion, the Managing Director, as
Chairman of the Board, summarizes the views of Executive Directors,
and this summary is transmitted to the country's authorities. An
explanation of any qualifiers used in summings up can be found
here:
http://www.imf.org/external/np/sec/misc/qualifiers.htm
.